Colombia

The SANTOS administration has highlighted five "locomotives" to stimulate economic growth: extractive industries; agriculture; infrastructure; housing; and innovation. Colombia is third largest exporter of oil to the United States. President SANTOS, inaugurated in August 2010, introduced unprecedented legislation to better distribute extractive industry royalties and compensate Colombians who lost their land due to decades of violence. He also seeks to build on improvements in domestic security and on President URIBE's promarket economic policies. Foreign direct investment reached a record $10 billion in 2008, but dropped to $7.2 billion in 2009, before beginning to recover in 2010, notably in the oil sector. Pro-business reforms in the oil and gas sectors and export-led growth, fueled mainly by the Andean Trade Promotion and Drug Eradication Act, have enhanced Colombia's investment climate. Inequality, underemployment, and narcotrafficking remain significant challenges, and Colombia's infrastructure requires major improvements to sustain economic expansion. Because of the global financial crisis and weakening demand for Colombia's exports, Colombia's economy grew only 2.7% in 2008, and 0.8% in 2009 but rebounded to around 4.4% in 2010. In late 2010, Colombia experienced its most severe flooding in decades, with damages estimated to exceed $6 billion. The government has encouraged exporters to diversify their customer base beyond the United States and Venezuela, traditionally Colombia's largest trading partners; the SANTOS administration continues to pursue free trade agreements with Asian and South American partners and a trade accord with Canada is expected to go into effect in 2011, while a negotiated trade agreement with the EU has yet to be approved by the EU parliament. Improved relations with Venezuela have eased worries about restrictions on bilateral trade, but the business sector remains concerned about the pending US Congressional approval of the US-Colombia Trade Promotion Agreement.